Setting up payroll in Malawi – Key facts to know

Source: canva.com

The Southern African nation of Malawi was hard hit by the COVID pandemic and the resulting lockdowns. Pre-pandemic GDP growth levels of over 5% are expected to return in 2022, according to the African Development Bank Group. Despite this, the country provides attractive investment opportunities for companies willing to invest over the long term.

Every company is only as good as its employees. Companies need to stay abreast with the latest regulations, over and above the COVID-related vaccine mandates that are occurring worldwide. With that in mind, here is a rundown of the important payroll facts that employers must keep in mind.

Contributions

Employers are obligated to contribute 10% to the nation’s National Pension Scheme while employees are deducted 5%. These represent the only payroll contributions all parties are responsible for. Income taxes are charged based on rolling slabs. The standard VAT rate in the country is currently 13.5%

The government has fixed 3 tiers, with the first tier applying to those who earn up to 1.2 million MWK (Malawian Kwacha). These earners pay no taxes. Those earning up to 36 million MWK pay 30%, while the highest bracket of 35% is reserved for those earning more than 36 million MWK.

Payroll Cycle & Minimum Wage

The government, under the Employment Act, has mandated that employees are entitled to a minimum wage of 50,000 MWK per month, which translates to 2,380 MWK per day in both urban and rural areas. The Employment Act also defines when an employer must pay wages.

Employers must pay no less than once a week or 2 weeks for hourly, daily, or weekly employees or those whose ages are calculated on this basis. Employees whose wages are calculated on a monthly or yearly basis must be paid no less than once every month.

Currently, there are no provisions regarding the payment of a 13th salary.

Working Hours and Leave Provisions

Employees are placed on probation for the first 3 to 6 months of their job. However, these periods can last for up to a year in some cases. Malawi’s standard workweek lasts no longer than 48 hours, with work hours stipulated in an employee’s contract.

Hours worked during public holidays are paid at twice the regular salary. Overtime hours are compensated at 200% of regular salary, while overtime on public holidays is paid at 400% of the employee’s regular salary.

Overtime during the working week is compensated with daytime off instead of financial remuneration. Malawi also has a structure defining employees’ paid time off. Employees are entitled to a minimum of 15 days paid time off if they work a 5-day week. Those working 6 days per week are entitled to 18 days PTO.

The country has 12 public holidays in a year. Employees who complete 1 year of service are entitled to at least 4 weeks of sick leave with full pay and 8 weeks on half pay per year. Pregnant employees receive 8 weeks of maternity leave with full pay, every 3 years. There is no statutory paternity leave in the country or parental leave of any kind.

Termination

Employers can terminate a contract for business, personal, or misconduct-related reasons. They must provide a written explanation and notice. In case of employee misconduct, a warning must be provided, and the employee must be given a chance to explain their actions.

Employment contacts may contain notice period provisions. If notice periods differ from statutory notice periods, the period specified in the collective agreement holds sway. Notice periods vary depending on how often the employee is paid. Monthly employees require 30 days’ notice. Those who have worked for less than 2 years receive 1 weeks’ notice. this period rises to 2 weeks if they’ve been employed for up to 5 years.

Those paid bi-weekly require 15 days’ notice. The exceptions are employees with more than 5 years’ service who receive 30 days’ notice. Employees who are paid on an hourly or daily basis receive 1 days’ notice if their term of service is less than 6 months. Those who have worked for up to 2 years receive 1 weeks’ notice, 15 days for those who have worked for up to 5 years, and 1 month for those with more than 5 years of service.

Employees who have completed at least 1 year of service are entitled to severance pay if the employer has laid them off. Employees who have been unfairly terminated are also entitled to severance. Those who have served up to 5 years receive 2 weeks’ pay while those who have worked for up to 10 years receive 3 weeks’ pay. Employees who have worked for longer than this receive 4 weeks’ pay.

Visa Sponsorship

Foreigners with employment offers in Malawi require a Temporary Employment Permit or TEP, which the employer applies for. Immigration headquarters handle all application requests, and the TEP Committee considers the application before forwarding it to the Minister in charge for final approval.

The applicant will be formally notified of the decision and will need to pay necessary fees within 30 days from the date of confirmation.

More details information on Malawi’s employment law and payroll regulations can be found at:

https://papayaglobal.com/countrypedia/country/malawi/
https://mywage.org/malawi
https://alrei.org/

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